Telecommunication giant, MTN Group Ltd, has resolved to go ahead with plans to reduce its stake in its Nigerian subsidiary.
The South African based firm, whose Nigerian business unit is the largest telecommunication firm in Nigeria, will have to sell off those shares in smaller units than earlier anticipated due to the effect of the coronavirus pandemic on the global economy and the capital market.
Nigeria, which happens to be MTN’s biggest market, accounted for a third of overall 2019 revenue and almost 40% of earnings before interest, taxes, depreciation and amortization, is also the biggest provider of telecommunication services in the country, with about 69 million customers, according to the Nigerian Communications Commission (NCC).
Although the impact of the coronavirus disease and the crash in crude oil prices globally has been quite huge, especially on the financial and capital markets, officials of MTN Group, still recognize the importance of selling part of its 79% stake to local investors.
In a monitored report, the Chief Financial Officer of the firm, Ralph Mupita, in an interview, said, ‘However, the rest of a three-to-five-year plan to dispose of 25 billion rands ($1.4 billion) of assets will probably take a back seat for nor’.
‘In Nigeria, we still want to do part of our retail offer, even if it’s a smaller part of the total planned sale’
‘We are applying our minds to doing this at the moment’
It can be recalled that MTN’s Nigerian subsidiary has been involved in a couple of disputes with the Federal Government over its operation in Nigeria. This started when in 2015, Nigeria slammed the Telecomm firm with a heavy fine of $5.2 billion after it was accused of a security breach and not disconnecting users with improper records.
However, this fine was reduced to $3.9 billion after diplomatic negotiations between the South African Government and then MTN itself.
They also recently had a legal disagreement with the government over tax payments and irregular capital importation certificate.
MTN plans to dispose of its 15% stake to indigenous investors, thereby reducing its shareholding to about 64%.
The crash of crude oil prices has had a huge negative impact on the global economy including major oil producers like Nigeria. That development in addition to the outbreak of the coronavirus pandemic has adversely affected the capital market which has seen stocks crash globally. The MTN Nigeria’s share price crashed from N104.50 on March 18, 2020, to N90 on March 30, 2020.
The MTN Group’s share price which hit a 15 year low last week, has since rallied back for 6 straight days
The CFO said, “We, of course, have no visibility on how all of this could play out, but the business currently has a resilient balance sheet and is highly cash generative, with most of our business coming from pre-paid contracts,”
The telecoms firm expects an increase in data usage as its customers go into lockdown and restrictions due to the outbreak of the coronavirus.